Japan’s Sharing Economy

GR Japan’s Yutaka Iwahori charts a policy balancing act in developing a sharing economy along with traditional industry sectors

Japan continues to grapple with issues thrown up by the advent of the sharing economy and its impact on incumbent industry sectors. On the one hand, the Abe Cabinet is taking a positive stance toward introduction of the sharing economy. At the Council for Regulatory Reform meeting on 16 June 2015, Prime Minister Shinzo Abe declared, “I am determined to accelerate regulatory reforms such as promotion of the sharing economy.” Promotion of the sharing economy was also mentioned in the governments’ growth strategy for 2016, as it was in 2015.

However, the challenge for newcomers is that while the Prime Minister’s office is positive, actual authority to regulate each industry rests with the ministries, which have responded in their characteristically conservative manner. Progress of the sharing economy is therefore dependent on a precarious balance between the positive attitude of the Prime Minister’s office and the cautious approach of the ministries.

Home sharing is a case in point. The number of foreign visitors to Japan has been increasing rapidly, from approximately 5 million in 2003 to 20 million in 2015. Seeing the rapidly rising demand for accommodation, which is predicted to accelerate further in the lead-up to the 2020 Tokyo Olympics, the Abe administration is looking to home sharing to complement the limited options and stretched capacity for tourist accommodation during periods of peak demand, by using the attributes of the sharing economy – its unique ability to match supply and demand in real time.

In order to deal with policy issues raised by home sharing (called minpaku in Japanese), the Ministry of Health, Labor and Welfare (MHLW) and the Japan Tourism Agency (JTA) established a joint study group in November 2015 to discuss new rules for home sharing in Japan. The study group’s final report, released on 22 June, is expected to serve as the basis for draft legislation that will provide a framework for hosts, property managers and internet-based home sharing brokerage platforms.

Under the new legislation, platform operators and property managers will be required to register with the government, and the government will institute a variety of new measures to ensure they are acting responsibly and are legally compliant.

Fierce resistance

Details of the new framework remain undecided, however, due to fierce political resistance from the hotel and ryokan industry. To draw a line between hotels and home sharing, the study group proposed a cap on the number of days per year that a property can be shared, a compromise that left neither side happy. The final outcome will depend on the discussion and consensus now taking place within the ruling party. The government will submit draft legislation to the Diet, possibly as early as the extraordinary session this fall. If the law is passed by the Diet, it will be implemented next year after several months of preparation.

In contrast, the legislative discussion on ridesharing in Japan continues to face massive resistance from the taxi industry and drivers’ unions, which both have close relationships with the ruling and opposition parties.

Despite the challenging circumstances, Uber Japan managed to commence operation of a remunerated transportation scheme for underserved areas using private vehicles in Kyotango City (Kyoto Prefecture) from May of this year.  To bring even this modest project to fruition, Uber Japan had to overcome numerous and formidable obstacles, including approval in the regional public transport council where the local taxi industry had a de facto veto.

In another step forward for ridesharing in Japan, in June, the Diet passed revisions to the National Strategic Economic Zone Act, based on a proposal from three cities (Kyotango, Yabu and Senboku), allowing each Special Economic Zone (SEZ) in Japan to implement ridesharing-type services – mainly in order to serve foreign tourists in areas where the supply of transport options is insufficient. Although there are still many limitations to the scheme, it represents a milestone for further legislative discussion on ridesharing in the future.

The Abe administration’s new economic growth strategy, declared in the context of promoting the so-called “fourth industrial revolution”, announced the establishment by fall this year of “a council to discuss and finalize measures needed to promote sharing economy.” Though the scope of the discussion in the council is still uncertain, it appears that the debate and efforts to promote the sharing economy are gradually moving forward. Despite strong resistance, there are forces both in the business world and among policy makers who believe in the potential of the sharing economy to fill unmet needs and to benefit the people of Japan.


Screenshot 2016-09-05 14.30.03This article appeared in an eight page special report produced in association with GR Japan. Click here to download the report